Advantages of taking a home loan

If you are planning to buy a new home, but are still having second thoughts about it, then just sit back and relax. The best and easy option for you is to apply for a home loan at low-interest rates. A home loan should not be looked at a mere debt but as a tool of convenience. It comes with several advantages that can’t be ignored. The best reason to opt for a home loan is that it is the cheapest form of credit available. We have listed a few reasons which prove that a home loan can be beneficial for you:

1. Capital appreciation: You will benefit from the rise in prices of the property over time. Your home’s appreciation, in most cases, is likely to surpass the amount of interest you end up paying over the home loan tenure. Also, you have the option to rent it out. Some home buyers avoid taking a home loan as it comes with a monthly cash burden, but they don’t realize that with time their disposable income will also increase.

2. Tax benefits: A home loan can help you save a tremendous amount of tax. As a borrower, you can claim deduction both on interest paid and the principal amount of the loan under Section 24 and Section 80C respectively of the Income Tax Act. While you can claim a deduction of up to Rs. 2 lakh every year for interest component under Section 24 of the Income Tax Act, a maximum deduction of Rs. 1.5 lakh is allowed under Section 80C. The deductions can be claimed only after the construction of the house is complete. You are not eligible to claim the income tax deductions while the property is under construction.

3. No prepayment charges: There are no prepayment penalties in case of floating rate home loans. So, whenever you have surplus funds, you can utilize it for making prepayments on your home loan. This would reduce your overall interest burden.

4. Balance transfer facility: In case of a home loan, you have the option to transfer your loan to a different lender if he is giving you the loan at a lower interest rate. However, if your home loan is coming to a close and the outstanding amount due is only a small portion, then there is no purpose served in making a switch. Make sure that you always make a switch in the earlier half of the tenure. This will benefit you as you will be paying a lower home loan interest rate when you make a home loan transfer.

5. High repayment tenure: Home loan comes with a longer tenure which goes up to 30 years, so one can reduce the burden of equated monthly installments by extending the tenure. Use the home loan EMI calculator available on the websites of various fintech lenders to know how your EMI changes as you change your home loan tenure.

In conclusion, a home loan is the cheapest form of credit available. It can help you to have a great cash flow and is the best tool to help save tax. Hence, when investing in a home, buyers should not shy away or avoid a mortgage, but instead embrace it. Moreover, with all the options available the borrower should take time in choosing the best option, and to be safe, consult experts for advice.

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